Life Insurance with Fixed Premium Rates, What are my Options?
There’s no question that a life insurance can make your family financially protected when you die, but taking out a policy can be a little daunting if you’re unsure of what type of cover that matches your needs and what type of premium rate suits you best.
Remember that getting a coverage is a major financial decision and it needs careful thought. And don’t forget as well that when you take out a policy, you are committing to a long-term payment.
We’re talking here about years of paying a monthly, semi-annual, or annual premium in exchange for the coverage.
When you get insured, the last thing you need is to find out that your premium rate just increased. It happens all the time, but you can avoid the bad surprises if you know the right policies that provide a fixed premium rate.
Take note that a simple bad decision can affect your finances down the road, but when you get the right policy, everything will be fine. To help you shop around, this article examines the fixed premium rate and takes a look at your different options.
What is a Life Insurance with a Fixed Premium?
A life insurance with a fixed premium means the premium rate that you have to pay throughout the duration of the policy will remain the same regardless of the length of the coverage, the increase in your age, the condition of your health, or the passage of years. In other words, it is fixed from the day you paid your first payment and up to the last.
So, why it’s a good thing?
Basically, a fixed premium rate gives you better control over your budget as far as the payment is concerned.
With the premium locked to the same amount and because it is simple and straightforward from the get-go, you don’t need to worry about budgetary adjustments. Instead, you gain long-term cost savings because you’ll be paying the same exact amount even if inflation happens.
You should know, however, that any life insurance with a fixed premium rate is normally more expensive than policies that increase their premium as you age. But this is not permanent. As the years pass by, the fixed rate makes it even more affordable.
Types of Life Insurance with a Fixed Premium Rate
Generally, there is only three type of life insurance with a fixed premium rate. These are the level term life insurance, the guaranteed universal life insurance, and the whole life insurance. To help you decide which one suits your particular needs, let’s examine what each of these policies offers.
Level Term Life Insurance
A level term life insurance is a type of term life insurance with a fixed coverage amount, a fixed premium rate, and a fixed period. All of these elements remain the same throughout the life of the policy. Because everything is fixed, you know outright the amount that you’ll have to pay every month or yearly and the exact amount that your family will get if ever you die prematurely.
Unlike other types of insurance, a level term life policy is very simple. It has no cash value build-up or any type of extra features or additional charges. Once you get covered, your only obligation is to pay the fixed premium until the policy ends. If you die when the coverage is still active, your beneficiaries will immediately receive the death benefits with no questions asked.
In a level term life insurance, the coverage is usually set at 10, 15, 20, 25, or 30 years. If you purchased a 20-year level term life insurance, for example, with a fixed monthly premium rate of $38.00, then it means you will pay the insurer the same amount every month for 20 years. If the coverage amount is $500,000, for instance, then that’s also the exact lump sum amount that your family will get if you die at any time during the period of the policy.
Take note of the fact that a level term life insurance expires. When the period of the coverage elapsed, then the policy ends. If you died after the policy ended, your beneficiaries wouldn’t get anything. Your next option is either to renew the policy annually or buy a new type of life insurance.
Just remember that when you seek a policy renewal, your new premium rate will be higher because of your age. It will be raised even more if you already have a medical condition.
The best thing to do is to make sure that you’ll get a level term life insurance that provides an option for conversion to a permanent coverage. This entails a higher premium rate, too.
So, what makes a level term life insurance a good policy?
Aside from being the most affordable life insurance product, a level term life policy is very ideal if you’ve just started a family and have a mortgage to pay or some other forms of debts that are too large for your family to shoulder just in case you die.
If you think a term life insurance is not for you but you still want a fixed premium rate, then your best option is to get a permanent policy, such as a guaranteed universal life insurance or a whole life insurance.
Guaranteed Universal Life Insurance
A guaranteed universal life insurance (GUL) provides a fixed premium rate throughout the life of the policy. Unlike a level term life insurance which guarantees a coverage for specific periods, a GUL coverage is offered based on age. It means that instead of a getting a 10, 15, 20, 25, or a 30-year term coverage, you’ll be insured up until a certain age of your choosing.
If you take out a GUL policy, for example, you’ll be deciding whether you want a coverage until you reach the age of 90 years old, 95 years old, or even 100 years old. In fact, you can even choose to get covered up until the age of 121.
With guaranteed universal life insurance, you will be paying a fixed premium rate with a guaranteed amount of death benefit. This type of policy is sort of a hybrid between a term life policy and a permanent policy. The main reason is that it provides a fixed period which can also be considered as permanent because the limit of the coverage might outlast one’s lifetime.
In other words, there’s a great certainty that you will die even before the policy expires. This is the reason why GUL is also sometimes referred to as a “no lapse” insurance. The great thing about this aspect is the policy might not expire while you’re still alive, which means your beneficiaries is most likely assured of getting a lump sum from your death benefit.
Keep in mind though that the higher the age of coverage you choose, the higher the rates. So, it pays to consider your own life expectancy when you get this type of policy. For the most part, it is a great option for older people, especially if you are already 60 years old or even older.
Unlike most of the permanent life policies, GUL has no investment component. As a result, it is very affordable and this makes it a very attractive option if you’re looking for a permanent policy with a fixed premium rate.
Whole Life Insurance
Whole life insurance is a basic type of permanent life insurance policy that provides a fixed death benefit and a fixed premium. As long as you’re alive and paying the policy, this premium rate remains the same even if you age or develop a medical condition.
A whole life policy has no expiration. Its coverage is throughout your entire lifetime, which is from the day the policy was set in effect up to the day of your death. But it has a maturity period.
Unlike the other two options, this type of policy is more expensive because of this living benefit. This comes from a savings component in the form of cash value that accumulates over time on a tax-deferred basis. This is outside the tax-free death benefits that your family will get if you die.
When you pay a premium for a whole life insurance, a percentage of this payment goes to your cash value. Because this type of savings grows and provides dividends, you can take a loan from it over time to cover some urgent expenses. You can also use the money to cover your premium payments or even use it as a collateral when you take a loan.
Remember that when you borrow money from the policy, you will have to pay it with interest. If you die and this loan is not yet paid, the money you owe (plus charges) will be deducted from the death benefits that your beneficiaries will receive.
If you’re financially established, you can choose to just leave your cash value savings, allow it to grow, and use it as your “nest egg.” If you decide to cancel the policy, you can get your remaining cash value minus an amount for the cancellation charge.
A whole life insurance is ideal for older people with more capability to pay a higher premium. This can be a good option if you like more predictability in your life insurance policy, if you are looking for ways to gain more savings, and if you need another source of the fund which you can tap anytime to cover an emergency expense.
If you’re already retired and your family is settled, your death benefits from a whole life insurance can also be a good source of funds to pay off your remaining debts so it would no longer be a burden to your family. The remaining amount can also be used as an additional form of inheritance.
Whole life insurance has different types. These include the level premium whole life insurance, single premium whole life insurance, limited payment whole life insurance, indeterminate premium whole life insurance, interest-sensitive whole life insurance, and economic whole life insurance. You can choose from any of these types of whole life policy depending on your specific needs.
Which is Best for You?
There is no one-size-fits-all life insurance. To find the best policy, you need to consider your specific needs and situation. Weigh your options by determining a ballpark figure of the coverage that can help your family if you die unexpectedly and compare this against the different types of premium rates that you can comfortably pay in the long-term.
You can also take into account your age, family situation, income stream, debts, medical condition, and other life situations that might affect your capability to keep the coverage for as long you need.
Fixed Premium Life Insurance Quotes
Shopping for the best life insurance requires good research and careful thoughts. People make mistakes all the time; realizing in the end that either they purchased a wrong policy or they can’t keep it anymore because it turned into a financial burden. It pays to be sure from the very beginning, but it can be difficult and confusing at times.
To avoid the pitfalls that come from buying a wrong policy, you can seek help from a professional insurance broker like us. We can help you shop around for the best life insurance policy that you need without breaking the bank.
As a start, you can contact us so we can immediately help you get a quote from different life insurance companies. We can do this work for you with no extra charges and we can give you an advise after we assessed your situation.
Because we represent many of the top A-rated life insurance carriers in the country, we can assure you that you can get the best policy at the most affordable rate. We’ll also make sure that it’s tailored-fit to your specific situation.
Take note that although we represent insurers, we don’t work for any one of them and we have no bias towards any these carriers. When you seek our help, we’ll be working solely for you.
Unlike when you work with an insurance agent from a particular insurance company, we can give you an assurance that our main goal is your best interest. We are not here to sell any life insurance product, but to advise you on your best options. To get started, you can call us at 212-573-5563.